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D-cinema looks to conquer credit crunch

Studios, exhibitors weigh options due to global money woes

LAS VEGAS -- The rollout of digital cinema systems has been frozen in motion like an image on a stuck film projector, an industry casualty of the global credit crunch.

There's good consensus on technical considerations and even business models, with virtual print fee agreements in place with most of the studios -- though there's been considerable grousing about foot dragging by Warner Bros.

Warners hasn't signed a VPF with the biggest rollout facilitator -- Digital Cinema Implementation Partners, which serves the three biggest domestic exhibs -- and it participated only in the first phase of a systems integration by a small facilitator, now called Cinedigm and then known as AccessIT.

But even where deals guaranteeing studio support to exhibitors to defray most costs of installing d-cinema systems are in place, there's been a big holdup involving the bank capital needed to back up the VPF agreements. The snag has prompted much grumbling and even a bit of reconsideration.

Paramount now seems to be putting more emphasis than other studios on hammering out VPFs directly with individual exhibitors, bypassing the two chief third-party integrators. Par unveiled a direct-to-exhibs package for U.S. theaters in January and Wednesday announced a similar deal for international circuits.

It's unclear if that route will prove any more successful at attracting Wall Street capital than the third-party route. But the protracted financing drought seems to have prompted a collective sentiment that amounts to, "So do you have a better idea?"

A d-cinema panel discussion at ShoWest on Wednesday swung pretty much on that question.

"Exhibitors can go out and borrow money themselves, just as they would for seats or anything else," Par exec vp operations Mark Christiansen said of the direct-to exhib VPF plan the studio is offering.

But he acknowledged the direct-to-exhib approach lacks critical mass, as Fox is the only other studio offering such a plan. "We don't like to go out there and do these things and then see that Studio X isn't paying anything at all," Christiansen said.

JPMorgan managing director Andrew Sriubus, who also participated in the panel discussion, predicted that U.S. credit constriction should begin to ease considerably by summer.

"We're feeling really good about where the markets are, as long as they stay relatively stable," Sriubus said.

Still, there is no denying that time is a-wasting for d-cinema and 3-D proponents.

Studios are poised to release more than a dozen 3-D movies this year. So the rollout of digital systems to support the 3-D equipment needed to exhibit such pics is of immediate interest to distributors and theater operators alike.

Even the incremental additional cost of providing patrons with special 3-D glasses is causing some friction between distributors and exhibitors. Noting this, Dolby said Wednesday that it will sell its re-useable glasses to exhibs purchasing the company's 3-D systems at a two-pairs-for-one price in an April sale promotion leading up to Disney's May 29 release of Pixar's animated feature "Up."

The worldwide d-cinema rollout also has figured prominently in discussions at the show this week.

Mumbai's Scrabble Entertainment has announced an agreement with Fox, Disney, Warners and Par to deploy d-cinema systems throughout the subcontinent. Universal also is expected to ink a support pact with Scrabble.

"The presence of digital screens will make it easier for film fans in India to enjoy more movies in 3-D, which is fast becoming a popular medium through which to view films," Scrabble said.

Other Asian integrators include D-Cinema Korea and GDC, while XDC, Arts Alliance Media and Ymagis work as third-party facilitators in Europe. Par, Fox and Universal announced a VPF deal that will cover Korea with DCK on Wednesday.

"The temperament has changed in recent months," said Arts Alliance chief Howard Kiedaisch, who traveled to ShoWest from his company's London headquarters. "There has been a flurry of activity. This is the first time since I've been in this business that it's actually hard to get projectors, because there is such a demand in the marketplace."

Fox exec vp digital exhibition Julian Levin said he's optimistic current difficulties can be sorted out and stressed his studio's commitment to d-cinema and 3-D exhibition.

"We've committed to more than 60,000 screens around the world, as soon as the credit markets get going," Levin said.

Noting that a meeting of world leaders is taking place in England to discuss such financial questions amid public uproar over the state of the global economy, Sriubas said he preferred to be at ShoWest discussing d-cinema.

"It's better to be here than in London right now where bankers are being burned in effigy," he said.